3 Minute Gold News

Josh is the co-founder and Chief Strategy Officer of Goldmoney, former Goldman Sachs executive director, London Senior Metals Strategist in the Global Economics, Commodities and Strategy Division, former Director of corporate development at Lundin Group, and has a Master of Science in Mineral Economics from the Colorado School of Mines.

by: Elaine Diane Taylor

Topics:

Josh Crumb

A big problem with the gold market is that people like to compare it with all sorts of different assets like equities, real estate or bonds.

But if you look at the math of gold and forget about the anecdotes and theories, people buy gold as a store of value and it trades with a currency-like volatility.

Gold has always been a global currency in math.

(People buy gold as money, a store of value, and the price moves like other currencies move and not like commodity prices, equities, real estate or bonds move.)

And if you look at the different currencies around the world which one is trying to be stronger?

Other than the Fed’s short-term lifting of interest rates, everyone else is expanding their balance sheets. (They’re trying to be weaker in order to build their own exports).

Compared to every other currency, and particularly the euro, gold looks very strong.

GOLDMONEY

$170 billion in gold is pulled out of the ground every year.

It’s distributed in the market through jewelry, coins, ETFs and possibly central banks. The company Goldmoney uses new technology and new utility to place that gold in the market.

It’s using technology to offer another way of owning and using physical gold.

GOLD AND CENTRAL BANKS

Gold is said to be only traditional as money.

But the biggest point about gold being money is that even though it’s been officially de-monetized it still performs and moves as money.

(Gold is deemed a commodity by governments but the price moves as currencies move and not as commodities move.)

The central banks that want to provide sound currency will, like Alan Greenspan used to do, look at gold as another indicator along with their CPI spreadsheet calculations (The CPI is the Consumer Price Index and indicates changes in consumer prices).

It should be another way of determining if you’re providing a good currency for your people.

WHAT TO WATCH FOR

To make a prediction on where the gold price is going, look at gold as a currency and compare it against other currencies.

For example, gold has outperformed the Canadian dollar for a decade straight — it didn’t even have a down year in 2013.

Against the U.S. dollar, other than Bitcoin, gold was probably the strongest currency last year.

That trend will continue going forward because all the other countries want weaker currencies.

Watch central banks and ask yourself, “What is their reaction function to markets?”

Central banks used to try to react to data but now instead they’re trying to pre-empt data.

They’re trying to do “whatever it takes”. (As Mario Draghi, President of the European Central Bank said in 2012).

So do we have another round of “whatever it takes” coming in Europe this year. That’s probably the biggest issue right now.

Also, even though the Fed wants to raise short-term interest rates, what you’re seeing is a flattening of the yield curve (shows returns for businesses is declining and almost always indicated bad news for stocks), and their not reducing their balance sheet by selling bonds that they bought during QE.

So gold looks good.

Gold is a money stock and not a commodity flow.

(It does not spoil like grain or have issues with warehousing and transport like electricity — those are commodity flow issues. Gold is a money stock. It doesn’t spoil and doesn’t have issues with warehousing and transport. Once gold is mined it’s here forever and you just add to the stock pile.)

Looking forward at the price of gold means looking at what the U.S. dollar and other central bank currencies are doing.

Goldmoney is the world’s gold savings and payments network. You can find more information about Goldmoney at their website www.goldmoney.com

Disclaimer: I’m not paid by Goldmoney to say nice things about them. I’ve just studied and written about gold’s value and history as money, and the development of financial tech and central bank currencies. Physical gold is good to hold and Goldmoney is a way to hold it and be able to spend it digitally at the same time. Good things.

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My thoughts…

Josh Crumb’s main point is that even though gold is not officially called money it still acts like money.

My only addition today is from Romeo and Juliet. Act II. Scene II.

“A rose by any other name would smell as sweet.” – William Shakespeare

The copybooks of the early 1900s gave us all the wisdom we need. The sayings that were copied are the truths, the gods, of our world. All the empires who followed the gods of the marketplace instead have fallen, and there’s terror and slaughter when the gods of the copybook headings return. The lyrics are by Rudyard Kipling. One of my gurus.

See the bankers wave their Wall Street wands and conjure piles of paper green. Naked short selling is like betting that your neighbour’s house will burn down. But in this scenario it happens to burn down. If the bankers win then we lose the whole world as we know it. I wrote this in 2009, with a lyric “A little grease (Greece) is floating out to sea, and little pigs (Portugal, Italy, Greece and Spain) are bobbing up and down, they’ll send a storm and we’ll see, when the tide goes out who’s naked on the beach“, and it’s coming on now. The world is changing as we know it.

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Nothing on this site is intended as individual investment advice. We’re all watching which way the wind is blowing.